MEMO: NEW CALIFORNIA LAW RE DISCLOSURE OF ONGOING CONTRACTUAL RELATIONSHIPS BETWEEN PARTIES TO A LAWSUIT AND COURT REPORTING AGENCIES

BACKGROUND: WHY DID CALDRA WRITE AND SPONSOR ASSEMBLY BILL 1197?

Certain practices engaged in by non-licensee corporate providers – practices labeled as “unsavory” by one California legislative committee – have gotten the attention of attorneys and the California Legislature. Chief among these practices that has caught the attention of attorneys and the Legislature is cost shifting by these court reporting corporations, the practice of charging higher-than-normal rates for certified copies to compensate for the low contract rates the corporations are giving their clients on the original in exchange for entering into exclusive contracts.

The non-licensee-owned corporations are cost shifting so flamboyantly that attorneys and the Legislature are audibly grumbling about it. Here is why: A noticing attorney can shop for the best price and service for the O+1. That attorney can take it or leave it. But the copy-ordering attorneys can’t shop around for their copies. If they want a copy, there is only one place the attorney can get it: from the reporting entity chosen by the noticing attorney.

Cost shifting hurts any party defending a depo, whether a plaintiff, defendant or codefendant. Moreover, it poses a risk to freelance reporting. Just as in theSerranocase in which a reporting firm holding the copy hostage until payment enraged judges and resulted in the court holding that, under narrow circumstances, courts can set freelance prices for copies, cost shifting by non-licensee-owned corporations will – unless the practice is curbed – result in some reaction from the Legislature or the courts or both. That might even include greater price regulation.

The only question is will cost shifting be addressed via an approach such as AB 1197, authored by Assemblyperson Susan Bonilla, or, as is the case in other states, via price caps and rate regulation imposed upon agencies? This is not a theoretical worry. As the Assembly Judiciary Committee analysis of AB 1197 observed: “Due to the widespread use of these exclusive contracts and the subsequent problems these relationships present to the legal profession, many states have stepped in to regulate these practices. Currently, 17 states have prohibited or limited these relationships.” The unanimous vote for AB 1197 in the Legislature over the opposition of the nation's biggest court reporting corporations shows how widely the practice is disdained, and the need to do something about it.

WHAT DOES ASSEMBLY BILL 1197 SAY?

AB 1197 amended the statute that sets out what must be included in a Notice of Deposition. The new law imposes no obligations on reporters or reporting firms.

California Code of Civil Procedure 2025.220 (additions to the Code in bold)(a) A party desiring to take the oral deposition of any person shall give notice in writing. The deposition notice shall state all of the following:(1) The address where the deposition will be taken.(2) The date of the deposition, selected under Section 2025.270, and the time it will commence.(3) The name of each deponent, and the address and telephone number, if known, of any deponent who is not a party to the action. If the name of the deponent is not known, the deposition notice shall set forth instead a general description sufficient to identify the person or particular class to which the person belongs.(4) The specification with reasonable particularity of any materials or category of materials, including any electronically stored information, to be produced by the deponent.(5) Any intention by the party noticing the deposition to record the testimony by audio or video technology, in addition to recording the testimony by the stenographic method as required by Section 2025.330 and any intention to record the testimony by stenographic method through the instant visual display of the testimony. If the deposition will be conducted using instant visual display, a copy of the deposition notice shall also be given to the deposition officer. Any offer to provide the instant visual display of the testimony or to provide rough draft transcripts to any party which is accepted prior to, or offered at, the deposition shall also be made by the deposition officer at the deposition to all parties in attendance. Any party or attorney requesting the provision of the instant visual display of the testimony, or rough draft transcripts, shall pay the reasonable cost of those services, which may be no greater than the costs charged to any other party or attorney.(6) Any intention to reserve the right to use at trial a video recording of the deposition testimony of a treating or consulting physician or of any expert witness under subdivision (d) of Section 2025.620. In this event, the operator of the video camera shall be a person who is authorized to administer an oath, and shall not be financially interested in the action or be a relative or employee of any attorney of any of the parties.(7) The form in which any electronically stored information is to be produced, if a particular form is desired.(8) (A) A statement disclosing the existence of a contract, if any is known to the noticing party, between the noticing party or a third party who is financing all or part of the action and either of the following for any service beyond the noticed deposition:

(i) The deposition officer(ii) The entity providing the services of the deposition officer

(B) A statement disclosing that the party noticing the deposition, or a third party financing all or part of the action, directed his or her attorney to use a particular officer or entity to provide services for the deposition, if applicable.(b) Notwithstanding subdivision (a), where under Article 4 (commencing with Section 2020.410) only the production by a nonparty of business records for copying is desired, a copy of the deposition subpoena shall serve as the notice of deposition.

HOW DOES ASSEMBLY BILL 1197 WORK?

In sharp contrast to price caps or regulation, this bill takes what the Assembly Judiciary Committee said was a “modest and reasonable step in regulating these contractual relationships by requiring disclosure” in the Notice of Deposition of the existence (not the contents) of contractual relationships between reporting firms and parties or those, like insurance companies, that fund litigation. The idea is to promote the parties and their counsel to monitor their invoices to let them determine whether there is a problem rather than assuming it is always a problem by regulating the price of certified copies.

In this way, the law takes its lead from how questions of fairness or impartiality are handled with other judicial officers: Disclose to the parties and let them figure it out. For example, California Code of Judicial Ethics Canon 1E provides that “[a] judge shall disclose information that is reasonably relevant to the question of disqualification under Code of Civil Procedure section 170.1, even if the judge believes there is no actual basis for disqualification.” Likewise, California Rule of Court 3.855(b)(1) regarding mediators provides: “A mediator must make reasonable efforts to keep informed about matters that reasonably could raise a question about his or her ability to conduct the proceedings impartially, and must disclose these matters to the parties.” And finally, by way of an additional example, California Code of Civil Procedure 170.1(a)(9) requires the disclosure of campaign contributions made to the judge by parties or counsel: “The judge shall disclose any contribution from a party or lawyer in a matter that is before the court…”

CAN THE LEGAL INTERPRETATION OF “PARTY” INCLUDE THE LAW FIRM ITSELF REPRESENTING THE PERSON OR ENTITY INVOLVED IN THE LAWSUIT?

No, for two reasons: One, “party” means party, not the attorney. Two, to underscore this difference between “party” and “attorney,” the bill contains a distinct approach to when a party instructs the attorney representing them to hire a particular firm (this is in subsection (B)), further underscoring that they are not one and the same, because we are writing about them and treating them differently. It has long been the policy of both CalDRA and the National Court Reporters Association to differentiate between contracts with parties (not officers of the court) and those with attorneys who have ethical duties as officers of the court.

Consider this from NCRA, with emphasis supplied: “Once a party-in-interest…is allowed to manipulate the business transaction to their exclusive benefit and/or exerts control over the work produced by the court reporter, the reporter and/or the reporting firm’s impartiality can be called into question…”

Just as with judges, not just actual impartiality but the perception of impartiality is important to consumers of court reporting services when taking a broad look at the court reporting profession. Given the public’s belief in and dependence on the court reporter’s integrity and impartiality, and their status as officers of the court, exclusive contractual arrangements between a party-in-interest in litigation and the court reporter or reporting firm obviously poses a risk both to impartiality and the perception of impartiality.

IS IT CALDRA’S MISSION TO STOP MY ABILITY TO HAVE LAW FIRM MANAGEMENT REQUIRE THEIR STAFF TO BOOK MY AGENCY?

No. The bill does not require this and, in fact, is careful not to touch it. First, the bill is about contracts between parties and court reporting agencies, not between law firms and court reporting agencies. Second, CCP 2025.220 is written with the “party” being the subject in the sentences. Thus, when the bill provides “the party noticing the deposition directed his or her attorney to use a particular officer or entity,” it is careful not to reach the situation where a law firm is choosing the agency.

IS IT CALDRA'S MISSION TO STOP COMPANIES OR INDIVIDUALS FROM INSTRUCTING THEIR ATTORNEYS TO BOOK A PARTICULAR AGENCY?

Of course not. Licensed freelancers and firms owned by licensees are unafraid to compete on the basis of quality and price. But if contracts between parties to litigation and non-licensee-owned firms deploying the services of impartial judicial officers result in costs being secretly shifted to other parties to, in effect, reimburse the corporate provider for charging another party less, and in such amounts as to be noticeable by the other parties, then we at CalDRA think treating parties so differently is a problem, and so does a unanimous California Legislature.

IS IT CALDRA’S OPINION THAT A “CONTRACTUAL RELATIONSHIP” UNDER THE LAW WOULD ENCOMPASS A LAW FIRM, COMPANY, OR INDIVIDUAL AGREEING ORALLY OR IN WRITING TO BE INVOICED AT A SPECIFIC RATE FOR A SPECIFIED NUMBER OF DEPOSITIONS?

Between a court reporting agency or corporation and a law firm? No. Between an individual who is an attorney and a court reporting agency? No. Between an agency or corporation or individual if they are a party or third party, with no ethical duties to the process or the court like an attorney has? Yes. And this has forever been CalDRA’s and NCRA’s position; namely, that contracts between parties to a lawsuit that, unlike attorneys, have no ethical duties to the court and a court reporting agency raise potential problems. Why? Not only the aforementioned risk to impartiality. The other reason is that the party is not the actual user of the transcript. So relationships between parties to litigation, who don’t use the product they are paying for, and court reporting agencies distorts the market away from rewarding quality and price (CR firms’ strengths) in favor of just price.

IS MY AGREEMENT TO SHOW UP FOR ONE DEPO A “CONTRACT”?

No. The bill specifies that it isn’t: “… for any service beyond the noticed deposition.”

HOW IS IT ENFORCED?

Current law already sets out the requirements for objecting to a notice of deposition. There is very little chance of widespread objections. Attorneys run large risks in objecting frivolously. To do so is costly (requiring personal service on all parties, for example), the results have to be blessed by a judge at some point, and the process risks tit-for-tat discovery responses.

Objections under current law must be made fully three days before the scheduled deposition, ensuring that if there is an objection, it won’t be made after the reporter and attorneys show up.

There are few formal objections filed now to deposition notices. What will happen under this bill is that the attorneys will confer and work it out. The strategy of the bill is thus that attorneys will be educated about these contracts, tie them to these odd charges they are getting, and push back to the benefit of the profession and CSR firms and reporters.